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China’s Digital Route To Dominance

It’s got a remarkably catchy name: Peace, or the Pakistan East Africa Cable Express, and it’s an undersea cable that will connect Pakistan’s Gwadar Port to a landing point near Mombasa in Kenya. It’s one of many undersea cable links being built by Chinese companies like Huawei Marine and the goal is to ensure all digital roads lead to China.

Laying undersea cables is just one part of what’s been nicknamed China’s Digital Silk Road. It’s an attempt to connect large swathes of Africa, the Middle East, South-East Asia and even South Asia to a hi-tech network dominated by the Chinese state or by one of its corporations. And while the key emphasis of China’s ambitious Belt and RoadInitiative (BRI) is on building infrastructure, the Digital Silk Road will underpin BRI strategy every kilometre along the route as China deploys technology to boost its influence.

Whenever we ever feel like comparing ourselves with the Chinese, it might be instructive to take a look at the Digital Silk Road which shows the gigantic scale of Beijing’s vision in which they can marry hardware and powerful hi-tech corporations that can take on all-comers. In addition, China’s playing for high stakes: a world in which the remnimbi has equal status with the dollar or more as well as for a world where companies like Huawei won’t be under threat from the US government that stops suppliers selling essential components. That means hi-tech self-reliance at home and a market abroad for its products. Also, in the coming years, it wants to be the leader in 5G.

Most importantly, Beijing wants to create conditions under which it, not the US and the Western world, will set the standards for the Internet and surrounding hi-tech environment. Controlling the flow of data will become “increasingly important in shifting the balance of geopolitical power in China’s favour,” noted a recent paper by Fitch Solutions Macro Research.

Besides the ‘Digital Silk Road’ consisting of networks of new fibre-optic cables, China has also launched a ‘Spatial Information Corridor’, consisting of Chinese-backed systems of communications, positioning and observation satellites. Would you like to use a Chinese alternative to GPS? Beidou’s Navigation Satellite System will soon be an option in many parts of the world. Beidou has a string of 46 medium-orbit satellites circling the Earth transmitting data to users and will soon be able to offer services globally.

Have the Chinese been able to muscle their way into markets once controlled by the Americans and the Europeans? Take a look at Huawei Marine which has taken part in 98 projects and laid 59,000 km of undersea cable. A decade ago, it was a small player and now it’s got 24 per cent of the undersea cable market.

China’s race to build undersea links has led observers to draw comparisons with the British back in the 1850s. Though many in the British government grumbled about the expense, the result was the British controlled the undersea cable market for telegraph and also determined standards to be met by companies from other countries. Incidentally, the British also chose Gwadar as their Indian sub-continent landing point. In the 19th century it was all about telegraph cables. Today it’s about fibre-optic cables for the Internet.

The Chinese also have an array of fibre-optic cable projects all over Asia. Early this year, an 820-km fibre-optic cable from Khunjerab in Xinjiang to Rawalpindi became operational. Last year, a 50-km fibre-optic cable from Kerung in China to Rasuwagadi in Nepal ended India’s dominance of the Mountain Kingdom’s Internet services. China has also laid fibre-optic cables to Myanmar and Kyrgyzstan. Reaching out to other corners of the globe, Huawei recently laid a 3,750 km undersea line from Brazil to Cameroon in Africa.

The Chinese have calculated, just like the British Empire in which trade followed the flag, they must build the infrastructure that will make it easy for their home-grown companies to hold their own against powerful US corporations. That’s precisely why US and European companies are worrying about the new powerful challengers emerging both in Africa and Asia.

Even in the Middle East, the Chinese have invested huge amounts in countries like Egypt and the UAE. Some observers believe the mutual interest between the two sides is fuelled by oil — the Arab countries want to strengthen their links with the country they believe will be their biggest customer in coming years. Similarly, the Chinese want to secure their oil supplies.

Huge opportunities

To be sure, there are opportunities galore all over Asia and Africa. Internet penetration is extremely low in countries like Myanmar, Cambodia and Laos. In the last two years, it’s risen steeply in countries like Indonesia and the Philippines just as it has in India. Chinese companies have invested large amounts in these South-East Asian countries. The Chinese companies are also driven by the fact their own market is maturing so they need to move to fast-growth regions.

Leading the way are Chinese giants like the BAT trio, Baidu, Alibaba and Tencent, that are pouring money into all corners of Asia and Africa. Companies like Alibaba have focussed on e-commerce and payments systems. The biggest Chinese venture-capital companies like Qiming Ventures and GGV Capital are opening offices in Singapore and scouting for new opportunities. Western firms say this is an expansion carried out in coordination with the Chinese government.

As the Chinese companies spread in all directions, questions being raised are whether they will respect Internet freedom or whether they’ll want to turn it into a policed zone where the state is supreme, as it is in China. Their Western rivals claim all Chinese corporations are subservient or in informal partnerships with the state. The Americans and Europeans insist the Chinese will change the very nature of the Internet because they prioritise state security and surveillance over all else. Observers see the BRI as being an import vehicle for China to push its goals of becoming a major tech power.

Hence, the moves to block the Chinese firms are accelerating and it’s clearly more than just a straightforward corporate battle. These efforts began even before President Donald Trump came to power. The West, led by America, wants to keep ruling the hi-tech roost. China is determined to change this. One international commentator described it this way by saying, “China’s task is to build a global coalition of countries that subscribe to its policies and ensure that new laws and norms are in line with its own interests.” One thing is certain: the struggle for tech dominance will remain a key source of tension in relations between China and the West.―The Hindu Business Line

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